CAIRO, May 10 (Reuters) - Annual urban consumer price inflation in Egypt accelerated to 12.1 percent in April, its highest in a year, on the back of soaring food prices which contributed to the mass protests that toppled President Hosni Mubarak earlier this year.

Inflation hit its highest level since March 2010 and was up from 11.5 percent year-on-year in March 2011. On a monthly basis, prices increased 1.2 percent in April.

Several economists had expected an increase in the rate -- the most closely-watched indicator of prices -- as a result of a weaker pound, higher oil prices and imported inflation.

'The headline (rate) stays high because the currency is weak and commodities are still expensive in spite of the recent correction,' said Liz Martins, economist at HSBC Middle East.

Analysts say they expect the central bank to keep interest rates steady in June to support an economy reeling from the impact of the popular revolt. Raising rates to combat food-driven inflation would have a limited or no effect on overall prices.

Martins said inflation was not demand-driven anymore and 'a hike won't bring down the price of bread'.

Food and beverage prices, which account for 44 percent of the weighting of the basket Egypt uses to measure inflation, rose 21 percent in the year to April, up from 20.5 percent in March.

Egypt, which relies on imports for at least half of its domestic consumption, could suffer further food price inflation after the U.N. Food and Agriculture Organisation said concerns over Chinese and U.S. winter crops could push global food prices higher while global production lags rising demand.

Economists expect headline inflation to continue rising in May, pushed up by higher food and oil prices as well as a currency depreciation. But they see the central bank keeping rates steady on the back of a weak macroeconomic backdrop and stable non-food inflation.

Investment Bank CI Capital forecast headline inflation to rise to 12.3 percent in the year to May, while EFG-Hermes expected it would average 12 percent in 2011.

Core annual inflation, which strips out subsidised goods and volatile items including fruit and vegetables, rose to 8.76 percent in the year to April from 8.54 percent in March, above the central bank's assumed comfort zone of 6-8 percent.

ECONOMIC SLOWDOWN

Anti-government protests fuelled by soaring prices, unemployment and demands for democratic reforms brought much of Egypt's economy to a standstill for nearly three weeks until Mubarak resigned on Feb 11.

A collapse in tourism and foreign investment following the political turmoil has hit revenues hard and economists forecast the economy of the most populous Arab country contracted 7 percent in January-March from the previous quarter.

Egypt's central bank kept its key overnight interest rates steady on April 28 in a bid to foster economic growth without reigniting high inflation.

It said the political shakeup would continue to affect consumption and investment, 'adversely weighing' on the economy, while global recovery was uncertain due to higher international oil prices amid political unrest in the region.

The International Monetary Fund projects Egypt's economic growth to plunge to 1.0 percent this year after a 5.1 percent expansion in 2010.

Egypt's finance minister has estimated that the political turmoil would reduce economic growth to 2.5-3 percent in the financial year to end-June from the government's previous forecast of 6 percent.